What happens when you open a Trump account
A Trump account is a custodial savings account held in your child's name, with you as the custodian until they reach age of majority (18 or 21, depending on your state). You deposit money, the account grows tax-free, and your child receives it when they come of age. The account itself is straightforward: it sits at a bank or brokerage, holds cash or investments, and generates no federal income tax on the growth as long as the money stays inside.
The account is opened in your child's name with their Social Security number, not yours. This means the money legally belongs to your child from day one, even though you control it while they are a minor. That distinction matters for taxes, for what happens if you die, and for what your child can do with it later.
You can deposit as much as you want into a Trump account in any given year. There is no annual contribution limit the way there is with 529 college savings plans. However, gifts over a certain amount ($18,000 per person in 2024, though this changes yearly) may trigger federal gift tax reporting, though not necessarily a tax bill. Check with a tax professional if you are planning large deposits.
Key Takeaways
- A Trump account is a custodial savings account in your child's name that grows tax-free until they reach age of majority, at which point they own and control it outright.
- You can deposit any amount without annual limits, but gifts over the yearly threshold ($18,000 in 2024) require gift tax reporting.
- The money can be used for any purpose once your child takes control—there are no restrictions like there are with 529 college plans.
- Your child's unearned income (interest, dividends) may be taxed at your rate if they are under 18, so the tax benefit is growth, not income avoidance.
- If you die before your child reaches age of majority, the account passes to them or to a successor custodian you name, depending on your state's law.
How the tax-free growth actually works
The account itself does not pay taxes on growth. If you put $5,000 in and it grows to $8,000, the $3,000 gain is not taxed at the account level. That is the main advantage. However, your child may owe taxes on the earnings depending on their age and how much they earned that year.
If your child is under 18, the first $1,300 of unearned income (interest, dividends, capital gains) in 2024 is tax-free. The next $1,300 is taxed at your child's rate, which is usually lower than yours. Anything above $2,600 is taxed at your rate—this is called the "kiddie tax" rule. These dollar amounts change yearly with inflation.
Once your child turns 18, all their unearned income is taxed at their own rate, which is typically much lower than an adult's unless they have substantial other income. This is why Trump accounts can be useful: you are shifting investment growth into a lower tax bracket.
If you are in a high tax bracket and your child has little or no other income, the tax savings can be real. If you are in a low bracket or your child will have significant income later, the benefit shrinks. A tax professional can model this for your specific situation.
When your child takes control of the account
At age of majority—18 in most states, 21 in a few—your child legally owns the account and you have no further say in how it is used. They can withdraw all of it, invest it, spend it, or leave it alone. You cannot prevent this, and you cannot require them to use it for college, a car, or anything else.
This is a hard stop. Some parents are surprised by this. If you want to retain control over how money is used after your child turns 18, a Trump account is not the right tool. A trust with a trustee (which could be you, a family member, or a professional) gives you more control, but it is more expensive to set up and maintain.
Some custodians allow you to name a successor custodian in case you die before your child reaches age of majority. This person takes over managing the account until your child comes of age. Choose someone you trust completely, because they will have full control and no obligation to account to you or your child's other parent.
What you can and cannot use the money for
Once your child controls the account, they can use it for anything. College, a down payment on a house, starting a business, a car, travel—there are no restrictions. This is different from a 529 college savings plan, where withdrawals for non-education expenses trigger taxes and penalties.
While you are the custodian, the rules are less clear. Most states allow you to withdraw money for your child's benefit—food, housing, education, medical care. Some states are stricter and require the money to be used only for the child's direct benefit, not for household expenses that happen to benefit them. Check your state's Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) rules if you think you might need to withdraw before your child turns 18.
In practice, most custodians do not police how you use withdrawals. But legally, the money is your child's, and using it for your own expenses or to pay off your debts is a violation of your fiduciary duty as custodian. If your child later challenges the withdrawal, you could be required to repay it.
Trump accounts versus other savings vehicles
A Trump account is simpler and cheaper than a trust, but offers less control. It has no annual contribution limits, unlike 529 plans, but also no tax penalty if the money is not used for education. It grows tax-free, but your child's unearned income may be taxed at your rate if they are under 18.
A 529 plan is better if you are certain the money will be used for education and you want to maximize tax savings. Withdrawals for non-education expenses trigger a 10 percent penalty on earnings plus income tax. A Trump account is better if you want flexibility or if you are saving for a goal other than college.
A trust offers the most control but costs more to set up and requires ongoing management. You can specify exactly how and when money is distributed, and you can name a trustee to manage it after you die. A Trump account gives you no such control once your child turns 18.
| Feature | Trump Account | 529 Plan | Trust |
|---|---|---|---|
| Annual contribution limit | None (but gift tax reporting applies above $18,000) | None (but gift tax reporting applies above $18,000) | None (but gift tax reporting applies above $18,000) |
| Tax-free growth | Yes | Yes | No (trust pays taxes on growth) |
| Penalty for non-education use | None | 10% penalty on earnings plus income tax | None |
| Your control after child turns 18 | None | None (beneficiary controls it) | Full (if you are trustee) |
| Cost to set up | Free to $50 | Free to $100 | $1,000 to $3,000+ |
What happens if you die before your child reaches age of majority
If you named a successor custodian when you opened the account, that person takes over and manages it until your child turns 18 or 21. They have the same duties you did: to manage the money for your child's benefit and to hand it over when your child comes of age.
If you did not name a successor custodian, your state's law determines what happens. Usually the account goes to your child's other parent, or to a court-appointed guardian. The process can be slow and may require court involvement. Naming a successor custodian avoids this.
If both parents die and no successor custodian is named, the account becomes part of your estate and is distributed according to your will or your state's intestacy law. This can delay your child's access to the money and may result in it being managed by someone you would not have chosen.
How to open and manage a Trump account
You can open a Trump account at most banks, brokerages, and investment firms. Common options include Fidelity, Vanguard, Charles Schwab, and local banks. You will need your child's Social Security number, your own identification, and proof of address. The process usually takes 15 to 30 minutes online or in person.
When you open the account, you will be asked whether you want a UTMA (Uniform Transfers to Minors Act) or UGMA (Uniform Gifts to Minors Act) account. Most states use UTMA, which is broader and allows more types of assets. Ask the custodian which one they offer in your state.
You will also be asked to name a successor custodian—the person who takes over if you die. Choose someone you trust completely and who is likely to outlive you. You can change this later, but it is easier to decide now.
Once the account is open, you can deposit money, invest it, and withdraw it as needed. You will receive statements showing the balance and any earnings. Your child will not receive statements until they turn 18 or 21, depending on your state, at which point the custodian is required to notify them that they now own the account.
Frequently Asked Questions
Does a Trump account affect my child's financial aid for college?
Yes, significantly. Assets in your child's name are counted as their own assets for FAFSA purposes and reduce their financial aid by up to 20 percent of the account balance per year. Assets in your name are counted at a lower rate. If college financial aid is a priority, a 529 plan in your name or a trust may be better choices.
Can I withdraw money from my child's Trump account to pay for their expenses?
You can withdraw for your child's direct benefit—education, medical care, housing, food. Whether you can use it for household expenses that benefit them depends on your state's UTMA or UGMA law. The money legally belongs to your child, so withdrawals for your own expenses are a violation of your duty as custodian and could be challenged later.
What happens if my child turns 18 and when ready withdraws all the money?
They can do it. You have no legal right to stop them or to require them to use it for any particular purpose. This is the trade-off of a Trump account: simplicity and tax benefits in exchange for no control once they reach age of majority. If you need more control, a trust is the better option.
Can I have a Trump account for multiple children?
Yes. You open a separate account for each child in their own name with their own Social Security number. Each account is independent, and you manage them separately. You can name the same successor custodian for all of them if you wish.
Is there a important date to open a Trump account?
No. You can open one at any time while your child is a minor. However, the sooner you open it, the longer the money has to grow tax-free. There is no advantage to waiting.